Episode 17: The What, When and How of Farm Real Estate Appraisals with Jennifer Wilson-Oechsle
Navigating the ins and outs of the appraisal process might be a bit daunting, but that’s where Jennifer Wilson-Oechsle comes in. Jen is a licensed appraiser, and in this episode of AgCredit Said It, she answers important fundamental questions about what exactly appraisals are, when an appraisal is needed, how best to prepare for an appraisal, and more - all geared toward the specifics of farm real estate appraisals.
Here are the top what, when, and how of farm real estate appraisal questions answered:
Q: What is an appraisal?
A: Simply put, an appraisal is a process of determining an opinion of value.
Q: What are the different types of appraisals?
A: There are three common types of appraisals for farm real estate. The first is a bare land appraisal. This type of appraisal might be cropland or wooded areas without any buildings. The second type is an approved appraisal. This includes traditional buildings such as homes, machine sheds, shops, barns, and grain bins. The third is a specialized appraisal. These typically include swine and cattle confinement operations, dairies, and greenhouses.
Q: What is the process for completing an appraisal?
A: After gathering information needed to analyze the value of a piece of land or property, an appraiser will look for sales that have occurred within the surrounding areas, selecting the most recent with similar land or property components.
The appraisal process typically consists of three different approaches; the cost approach, the income approach, and the sales comparison approach. Each approach has its strengths depending on the type of property that’s being appraised.
The cost approach is typically used for improvement properties. The resulting value of the appraisal is the value of the land plus the appreciated value of the improvements being made on the property. The income approach is used for income-generating properties, like contract swine barns. The other approach is a sales comparison approach, typically used for bare land property values.
Q: When is an appraisal needed?
A: Most notably, appraisals are needed for a loan. The appraisal gives you a value for the collateral for which the loan is being used. Appraisals are also used for determining market-based values for land and estate sales.
Q: How is the value of an appraisal determined?
A: An appraisal value is determined by comparing sales data that is both the most recent and closest in proximity. In cases where there isn’t sufficient information available, particularly for specialized appraisals like feedlot operations, sales data can be found by looking at other states and scenarios.
Q: How to prepare for an appraisal:
A: One of the best ways to prepare for an appraisal is to get as much information about the property as possible. For farmers and landowners, knowing what the drainage looks like in a field parcel is particularly important. For homeowners, it’s improvements like a new metal roof or heated concrete floors.
Here’s a glance at this episode:
- [04:09] Jen explains what an appraisal is and its purpose.
- [07:45] The three different types of appraisals are defined by Jen, including how appraisals can be done pre-construction.
- [12:05] Jen explains how appraisal values are determined.
- [13:36] Jen discusses the three different approaches to appraisals and scenarios for when each is used.
- [18:34] There are various purposes for getting an appraisal that Jen discusses.
- [23:47] Jen addresses how a solar farm appraisal would be approached.
- [30:47] Jen provides some best tips for preparing for an appraisal.
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Guest Jennifer Wilson-Oechsle
Jennifer is a state certified appraiser and has been with AgCredit since 2017. Originally from Hancock county, She now lives and farms in Van Wert county with her husband.
Host Matt Adams
Matt serves Paulding County as an account officer at AgCredit. He has worked in ag lending for over three years and previously worked in farm equipment sales for 11 years. He and his wife farm in northwest Ohio with their two daughters and son. His favorite part about AgCredit is the people. From the member-borrowers to the internal team at AgCredit, every day keeps getting better. Matt hopes to bring insights to ag lending, and some laughs to the AgCredit Said It podcast.
Host Phil Young
Phil is an account officer for AgCredit serving Van Wert County. He’s been in ag lending for over three years, but his agricultural background goes back much farther. He grew up on his family’s farm, where his father raised a large herd of sheep. Currently, he helps with the family farm raising corn, soybeans, and wheat. Phil likes working at AgCredit because he can help people achieve their dreams. Whether that is purchasing a new piece of farm ground, updating a piece of equipment, or helping a borrower understand their financials, helping their clients succeed is always his goal.
Voiceover (00:02):Welcome to AgCredit Said It, the podcast for farm newbies and seasoned professionals alike. In each episode, our hosts sit down with experts from across the agriculture industry to bring you insights, advice, and must-have information on all things rural living, from farming to finances and everything in between. So let's get to it.
Matt Adams (00:26):Hello again, and welcome to another episode of AgCredit Said It. I'm Matt Adams, and alongside me, for the ride, today is the man, the myth, the legend, as always, Phil Young. Phil, how are you doing this morning?
Phil Young (00:39):I'm doing awesome. How are you, sir?
Matt Adams (00:41):Not too bad. I can feel spring is definitely in the air; 70 degrees yesterday, and a little rain rolling in, but looking forward to before we know, planters will be starting to roll in the field and everything greening up.
Phil Young (00:54):I know this time of year's rough because it's always teasing us. So it's always just like, "Hey, I'm coming, but maybe not today."
Matt Adams (00:59):The Northwest Ohio weather where you can go from snowing in the morning to raining at lunchtime to t-shirt weather in the afternoon.
Phil Young (01:07):Yep. Constantly having plans kiboshed, yeah. So yep.
Matt Adams (01:11):Well, today we have another great topic for everyone. Farm real estate sales have been a huge topic, a conversation and excitement in 2021 and spilling over into 2022. We've seen a large number of real estate auctions sales in our areas. I would say probably the most sales just in our coverage area here locally that we've seen in a good number of years. And it's a neutral topic conversation when real estate sales happen in an increasing price environment. And it's the topic of farm real estate appraisals that we're going to be doing today. And lucky for us, we have a state-certified appraiser joining us, Jen Wilson-Oechsle. She is a full-time appraiser with AgCredit, and she is going to enlighten us today on the topic of farm real estate appraisals. Jen, welcome to the podcast.
Jennifer Wilson-Oechsle (02:01):Hi guys. Thanks for having us.
Matt Adams (02:03):So Jen, start off. Why don't you introduce yourself, tell us a little bit about you, and how you became an appraiser for AgCredit.
Jennifer Wilson-Oechsle (02:11):Sure. So I guess I grew up in Hancock County, so I've always kind of been in the AgCredit area. So when I came to AgCredit was like coming back home, but I grew up at Hancock County, just South of Findlay, small farm. And I currently live here in Van Wert with my husband, Troy Oechsle. I do appraisals for AgCredit, mainly in the Western side of our association. So Van Wert, Paulding, Putnam, Henry counties, and then I do go into surrounding areas, which also led me to being certified in Indiana as well. As far as my background with getting here, I actually started in the lending arena in 2014 as a loan officer. I quickly realized that was not my forte like it is for you guys, but was introduced to appraisal through that experience. So then I started with AgCredit in 2017 and then became officially a licensed appraiser in 2019. And here we are today.
Phil Young (03:10):Nice. I think one of the most interesting facts about Jen is she loves Disney World, and I don't know the exact count, but how many times have you been to Disney World or Disney or... yeah. I don't know if you been to Disneyland or... yeah.
Jennifer Wilson-Oechsle (03:22):At least once a year for the past 15 years. At least. I worked there right out of college. My family was big Disney people growing up. So it was just kind of in my blood.
Phil Young (03:33):Yeah.
Matt Adams (03:34):So you can say you and Mickey are on a first-name basis at this point.
Jennifer Wilson-Oechsle (03:37):We really are. Yeah.
Phil Young (03:38):I told my wife, I said, if we ever go to Disney World, I'm contacting Jen and we're sitting down and having a consulting session.
Matt Adams (03:44):It's like your travel agent right there.
Phil Young (03:45):Yeah. I was like, she knows it. Like I'm a fool if I don't talk to her.
Jennifer Wilson-Oechsle (03:48):Yeah. I know the things.
Phil Young (03:50):Yeah.
Matt Adams (03:50):So Jen and you and Troy are both farmers as well too, correct?
Jennifer Wilson-Oechsle (03:54):Correct, yeah. Troy, when I met him, had already been farming in Van Wert County. And so we have our own LLC. We farm with his dad. He has some ground that we own individually. So yeah, it's a good fit for me.
Phil Young (04:09):Obviously, when you buy farm ground if you have to take a loan out you have a lot of us account officers say, "Hey, we need to do an appraisal on this property." And I guess that's the reason why we're here. What is an appraisal? Why do we say that? And basically, just define it for us in the simple terms. Yeah.
Jennifer Wilson-Oechsle (04:24):Sure. So to put it simply, an appraisal is just the process of determining an opinion of value. So people pay me for my opinion regularly.
Phil Young (04:34):It's a good spot to be in.
Jennifer Wilson-Oechsle (04:36):Yes. At AgCredit, I guess I should clarify too, that we do have four staff appraisers. I'm the one furthest to the west. Then we all are certified general appraisers, which means that we all did specific coursework. We took an exam and that made us licensed within the State of Ohio. And then a couple of us are also licensed in Indiana due to just proximity of our association to Indiana.
Phil Young (05:01):Do you get a badge? Do you have an appraisal badge?
Jennifer Wilson-Oechsle (05:04):We do have, it's like a little card
Phil Young (05:06):Okay, yeah. Legit.
Matt Adams (05:07):Official appraisal State of Ohio.
Jennifer Wilson-Oechsle (05:10):And we renew that annually. So yeah-
Phil Young (05:12):Okay, nice.
Jennifer Wilson-Oechsle (05:12):We give our dues back to the State of Ohio and Indiana.
Matt Adams (05:16):So when we look at on the AgCredit side and pretty much any lender side, but especially AgCredit, what is the purpose that we need an appraisal for at AgCredit?
Jennifer Wilson-Oechsle (05:25):Sure. So as appraisers working for AgCredit, our main focus then is to provide a value for that collateral that you guys are using for loans. And I don't know if you guys want to talk a little bit more about them, what that, we do the value, we talk to the borrower, we get the information on the ground that we're appraising, and we write it up, and we give it to you guys. And then at that point is when you guys take over it, and you work with the borrower and finish the process
Phil Young (05:53):We use appraisals, and so when you take a loan out, you have to have what we call security or collateral for that loan. And so, for younger borrowers who haven't borrowed money yet, I thought I'd explain this. So we give you funds. We give you a certain dollar amount, but at the same time, you have to provide collateral to kind of help support that money that we give you. And that's typically a certain percentage. It's not usually a one-to-one thing. And usually, we will lend maybe, for example, 70%, maybe we'd lend 70% of the appraised value. So in situations where you buy ground, you bought it for $100,000 to make math easy. We'd lend $70,000 basically. And so then you'd have to come up with $30,000 down or provide more collateral in that situation to kind of help keep cash in your pocket. So generally, I don't know if Matt, if you want to add to that, but that's-
Matt Adams (06:44):Yeah. And I think we kind of look at somewhat on we do always have our standards of lending and how we do things, but it's always a case by case basis too-
Phil Young (06:54):Correct. Yep.
Matt Adams (06:55):We look if on our AgStart program, it really just depends, that's why always sit down with your account officer and really come up with that plan. That's going to fit you right. Whether it's like we said, abundance collateral putting some more cash down. Do we look at some different programs that are available with USDA or something of that matter.
Phil Young (07:17):Yeah. You bought 40 acres, and you have another 40 acres free and clear. Do you want to just tie both of those to this loan, and then I can give you the full $100,000 and you don't have to bring any cash to the tables, kind of what we say. I think you put it well, it's a case-by-case basis, and we can kind of look at your scenario and determine number one. What do you have and what are you willing to do, and how do you want to structure it?
Matt Adams (07:39):So Jen, kind of go over, what are different types of appraisals that you guys do in the appraisal department?
Jennifer Wilson-Oechsle (07:45):Sure. So there are lots of different kinds of appraisals, but for what we deal with, for what we do for our credit purposes, most of the appraisals we do are either bare land, which means there are no improvements, it's cropland, woods or improve tracks. Like I said, a bare land appraisal, be one that doesn't have any buildings on the land. And that then approved appraisals would include what we would call traditional buildings. So homes, machine, sheds, shops, barns, grain bins, those kinds of things. We also do some of those more specialized appraisals. You all see the hog barns out there, the cattle barns. So we do things that include the swine and cattle confinement operations, dairies, greenhouses, or are just a few that we sort of specialize in the AgCredit arena with, but there are an infinity number of appraisals out there. But those are typically what we do, both those improved and specialized appraisals can be on existing structures, or we can do a hypothetical condition on that appraisal and appraise it before it's even built. So we can do it on new construction and use your construction contracts as sort of our data for what's going to be there eventually.
Matt Adams (09:02):So if I'm building a brand new hog confinement building and we haven't even poured concrete yet, you can still give me a good appraisal on as finished what that building will be in a pretty specific time.
Jennifer Wilson-Oechsle (09:16):Yep. And we're using factors like your construction data, the contracts that you've gotten in for excavation and wells, and all those things more than just the building itself. And then we're also comparing that data to what maybe other similar barns have sold for just to know kind of what external factors might be at play.
Phil Young (09:37):When we submit an appraisal request to you, or someone maybe does outside the association submits an appraisal request to you, what's that process look like? What do you do? What's involved?
Jennifer Wilson-Oechsle (09:48):So our first job is just to research what we're looking at. We do that by collecting tax cards, aerial and soil maps, we subscribe to a service that allows us to select specific parcels and see the aerial and the soil maps for those tracks. We talk to the AgCredit borrower and find out about that property being appraised. Many times, they are aware of what's going on, either they farmed it, or they farm around it. So they know what drainage looks like and those kinds of things. If it's a bare land track, no buildings a lot of times that inspection's just done from the road drive by get some pictures, but wouldn't that track is improved many times we meet up with the borrower to get a little bit more detailed information, walk through the property, get some pictures, both inside and outside and get those photos that'll help us with our appraisal process.
Phil Young (10:45):I think that's one of the great things I hear feedback on is my borrowers would be like, "Oh, I talk to the appraiser." And I think they just love having a conversation with you about it versus it being this abstract thing that happens around them and they don't really get to have any, and I don't want to say input, they just want to be a part of the process and understand what's going on, what do you think? And be able to provide some, I guess, more clarity on the property. So, yeah.
Jennifer Wilson-Oechsle (11:06):And we enjoy those conversations too. We learn a lot from our borrowers. It's amazing. They know sometimes what's all going on in the background we haven't heard about yet. And so it is. It's nice just to have those conversations and hear what they think is going on in the market too.
Matt Adams (11:23):And I think our borrowers see this also as another resource that we provide as an association, we have Jen who is a state certified appraiser. She's an AgCredit appraiser. And I think that just is another resource we can add value to our members that way.
Jennifer Wilson-Oechsle (11:41):And I think at least for me as an AgCredit borrower myself, it's just one less person knowing what's going on with your operation, you're already working with AgCredit, your loan officers in the loop. It's staying in house. Yeah.
Matt Adams (11:55):Right, yeah. And Phil, I will have to come back up to Jen's first thing collecting task cards information, account officers always get her that information on a timely manner.
Phil Young (12:03):Oh, sure. Yes.
Jennifer Wilson-Oechsle (12:05):You guys are wonderful. But I guess then as far as actually doing the appraisal, the next things we do after we've sort of gathered what we need for analyzing the subject track, the piece that we're looking at is we then look for sales that have occurred in the surrounding area where that subject track is located. And we use those then as comparable sales in that appraisal process, nearby sales with the most similar land components are what we try to select. Sometimes when there aren't as many sales, we don't have as many to choose from. It's harder and you've got to figure out what is the best fit. But right now we have a lot of sales. So it makes it a lot easier.
Matt Adams (12:49):I was going to say, you're probably not struggling to find sales data right now in the last 24 months.
Jennifer Wilson-Oechsle (12:54):No. And we try to go with the most recent sales possible. So as everybody knows, if we would go 24 months back, that was a very different market two years ago, where if we try to stay with sales within the last six months, we're going to have a much better idea of what the market has been doing in that area. And so in a time, like what we have right now, especially in this part of AgCredit’s association, where we have so many sales, it helps us give better value. We just have a better idea of what the market is everywhere.
Matt Adams (13:28):So you've gathered all your data. You have all your sales trends, everything information you've inspected the property, what's the next step.
Jennifer Wilson-Oechsle (13:36):Sure. So the appraisal process really consists of three different approaches. And these are what appraisers use across the board, whether you are appraising a bare land track, or you're appraising something very specialized. Appraisals are done for hotels and apartment buildings and all sorts of things across the spectrum, AgCredit really doesn't deal with those things a lot. But there are appraisers that do deal with those. And these three approaches that we work with are the cost approach, the income approach, and the sales comparison approach. Each of these have strengths depending on the type of property that we're appraising for AgCredit purposes something like the income approach is important because it shows that this is an income-generating property. How are you going to use this to pay your loan back, which is very different than what you would look for in a house appraisal, people buy that for different purposes. They're not income-generating like what a lot of farmland tracks would be.
Jennifer Wilson-Oechsle (14:34):But for these three approaches, the cost approach is typically used for improved properties. And this is one of the best ways that we have to value improvements. We use depreciation to bring down differences and costs of ages of different buildings, but then that resulting value of the track that we're appraising is the value of the land plus the appreciated value of the improvements on the property. The income approach, like I mentioned, is used to value a property based on its income capability. So you're not going to see the income approach being done on a residential property. No one's buying it for its income-generating abilities, but for a swine barn, one of our contract swine barns that we do a lot of in this area, that's very important. People are building those because of their income-generating capabilities. So that approach holds a lot of strength in those types of appraisals.
Jennifer Wilson-Oechsle (15:37):And then the sales comparison approach, which is something that we put a lot of emphasis on just typical bare land tracks, is where we directly compare our subject to comparable sales and make adjustments for different land types. Those would be things like if one track had a lot of woods or pasture or something like that compared to a bare 40, square 40 that's all tillable. And so we can also make adjustments, offer drainage, time, location, those kinds of things if we don't have a lot of sales available to pick from. So if you have a real wet track, but it's not a time where you have a lot of sales going on and you have very well drained tracks that you're using, you're going to make some sort of adjustment for drainage or time or location if you have a time where you don't have a lot of sales. So like I said, this approach, especially for bare land appraisals, is typically where we place a lot of emphasis when it comes to our final opinion of value, because it really shows true market participation.
Jennifer Wilson-Oechsle (16:44):Did you know, AgCredit offers more than just financing? Our appraisal staff complete the appraisals to help you determine real estate values for an estate purpose, purchase decisions or succession in transition planning? This is Jennifer Oechsle letting you know that AgCredit is a partner for our rural community. Give me a call at (419) 238-6838 for your appraisal needs.
Matt Adams (17:09):You talked about wooded tracks and parts on farms that may have a small woods. I know just in the recent, last 12 months, a lot of farms I've seen sell have a small wooded track, or it's just a wooded track all by itself. I see them getting sold more as a recreational hunting purpose now versus a lot of times we kind of used to look at maybe there was some income-generating from timber harvesting off that, has that changed the aspect of how you look at more of our, I call it more pasture, ground scrub, ground woods on that aspect.
Jennifer Wilson-Oechsle (17:46):So right now we have a lot of sales. So if we have a mostly wooded track or mostly pasture track that's really rolling and has a lot of trees scattered throughout. We actually have other sales that have sold that are very similar to that. So there are more recreational type tracks that are selling more pasture type tracks that are selling. We see that in times of a good economy and the high prices in an Ag economy right now is also a sign of maybe a good Ag economy. So that makes our jobs easier. When we don't have very similar sales to compare with that's when we're making those adjustments, because you aren't looking at apples to apples when you have a square 40 and something that's more wooded or more pasture. Yeah.
Phil Young (18:34):Yeah. I guess my question is outside of getting a loan, that's one purpose for doing an appraisal. Are there other purposes for people maybe wanting to get an appraisal on a property or can we do those?
Jennifer Wilson-Oechsle (18:45):Sure, yeah. Our appraisal department, the four of us that are certified appraisers have the ability to work with our borrowers on appraisals for purposes other than loans. And we have been doing a lot of these lately in a time of high land values, maybe some of their absentee land owners that they tenant farm for are thinking about selling and they'll come to us and want an appraisal. So they have a good idea of what that might be worth so that they can negotiate that selling price, their buying price with the landowner. So we do a lot of that for people who just want to market value for negotiation purposes. We also do them for estate purposes, the stepped-up basis for maybe even just families who are trying to figure out, does this brother want out and this brother's going to buy them out and what's that entail? If they're not just randomly throwing a value on that ground, it's more market based. So we do a lot of appraisals for a estate purposes a while as well.
Jennifer Wilson-Oechsle (19:49):And we do have the ability to also post date appraisals. So people talk about needing that stepped-up basis based on maybe the date of somebody's passing. And they didn't think of that when it happened. And now it's six months down the road, we have the ability to post date an appraisal. And what that means is we're only going to use sales for comparison that were prior to that date of passing. And so we're very familiar with that. And a lot of estate attorneys are aware of that and they can kind of guide their customers through that. But it is something that we deal with. For people I guess, interested who might be listening to this interested in fee appraisals probably the best way to get in touch with us is to touch base with your account officers or you can always just send a request in from the AgCredit website and they can get it directed to either the right appraiser or right account officer, and we can get you help that way too.
Matt Adams (20:42):So we've been touching base a lot on recent farm real estate sales in our area, the increased prices that these farms have been selling at, how has that changed? How you're looking at stuff, Jen, and the impact it's taken I always said our poor appraisers that are having to keep track of all this mad house, the real estate, the farm boom of '21 '22. I've been telling everybody, you might as well get on board because farms are selling everywhere.
Jennifer Wilson-Oechsle (21:09):Yeah. It's definitely had its headaches, but it has had its good sides too, because a lot of sales in the marketplace does sometimes make our job easier as far as finding-
Phil Young (21:19):Data rich. Yeah.
Jennifer Wilson-Oechsle (21:19):Yes. Finding sales in an area that might have two or three years ago had been no sales, trying to make an appraisal when there's nothing to compare it to that gets pretty difficult. I do appraise for the Western most part of our association. And like you guys have said over here, we have seen higher sale prices, which has resulted in wider overall range of sale prices to work with because not all properties that sell, even if we would call an arms link transaction, not between family, not between somebody that's giving them a discount relationship pricing for some reason. They're not all selling. We still have some that might be more of what we would call the value from two, three years ago. But they're just maybe ones that aren't willing to pay more and the landowner is willing to sell it at that price to keep it with the farmer who's been farming it for a long time or other things, there's all sorts of factors at play, but it does cause us to see that wider range of values to work with instead of working with a nice tight range and selecting a value from that.
Jennifer Wilson-Oechsle (22:26):Sometimes we have a range that spans several thousand dollars and we're having to figure out where the market truly lies in that range between those public auction, high sales and maybe some of the lower private sales that we see occurring in the marketplace. It does appear that land values are trending upwards for most of the AgCredit association. So good and bad purposes, depending on what side of the coin you are on that one. But for myself having both increased sale and an increased market, like I said, both pluses and minuses that higher the normal sale activity has allowed me better sales. It also has given that wider range of value to work with. Yeah.
Matt Adams (23:13):You know, one thing I've seen just in my time with AgCredit, with our renewable energy coming into play within our area, it's on a lot of farms now and now we have solar farms rolling in, how's that affecting the appraisal do you look at that as income generating side on that farm, even though say we have a 40 acre farm with a wind lease they take a couple acres out versus a solar farm where I've heard these are going to be-
Jennifer Wilson-Oechsle (23:44):All encompassing.
Matt Adams (23:45):Yes. A lot of acres on this.
Jennifer Wilson-Oechsle (23:47):So thankfully I have not yet had to try to deal with a solar farm. And when we do we'll approach it the same way we did when the windmills came this way. We have a network of appraisers all over the United States. I belong to an association called the Association of Rural Appraisers and Farm Managers. We network across the U.S. for more unique type situations. So because solar maybe is just starting to become a thing in our area, it's definitely already existing somewhere else, just like the windmills. When they first came in here, they had already existed somewhere else. So we haven't yet had to deal with solar. But when we do, we will use market support from outside our area to figure out how we will address appraising a 40 acre track, a 400 acre track that might be covered in solar panels and an income on that is going to that income approach I spoke about earlier will be huge because that's how a farmer's not going to be traditionally farming that ground anymore.
Jennifer Wilson-Oechsle (24:54):So we'll use an approach based on their income they're getting from that ground to somehow find a value on it. Windmills are very similar. So we've had the windmills for quite a while now. So we now have seen properties with a windmill sell. So when we have another property with a windmill sell, or maybe even just a lane from the windmill sell, we have comparable properties to compare that to. So how are those properties selling compared to one that doesn't have those windmills? And what's the difference in that value. And eventually when solar's here and when it's developed enough, if it comes, we should have those types of properties here as well that might eventually sell or change hands. And that will help the process down the road.
Phil Young (25:42):Okay. I listened to a radio show that they always have the segment where they'll have people call in with certain occupations and they always say, "Hey, what's common questions you get in your occupation." And you as an appraiser, living in an Ag community, I'm sure you get these common questions from people, I guess, what are common questions you get? And I know those are kind of so are typically some of the burning questions people have and they're like, "Oh, you're an appraiser? I have a question for you." And then they find out I'm a loan officer like, "Hey, I have a question for you. What are interest rates?" That's the common question I get. So what are common questions you get as Jen Wilson-Oechsle appraiser?
Jennifer Wilson-Oechsle (26:19):Right. So I actually had to sort of consult with the other appraisers within AgCredit. What questions are we asked? We're not like a loan officer, people aren't coming up to us and pinpointing us against the wall and making us tell them interest rates. But I guess one of the more common questions we get asked as appraisers is how do we determine what sales to use in an appraisal? And like I've mentioned is we just focus on using the most recent sales available. And for land sales, we typically have a good selection of sales available in each county. And we use sales that are both close in proximity and fairly recent. We're finding the best combination of that when maybe when we don't have as many sales as what we do right now, when that track becomes more specialized, say a dairy an operation and animal confinement barn, grain facilities, where you have maybe millions of bushels of storage on one track, we see more and more farmers putting up grain storage facilities, or even just a subject that doesn't have a lot of activity in that area.
Jennifer Wilson-Oechsle (27:23):We may be forced to look at older sales, we may be using that time adjustment, we may use sales that are further away location wise for very specialized sales. Dairies in particular, we go even to different states sometimes just to see maybe depreciation on dairies. And so we'll go to Wisconsin, to New York, to the Eastern where there are more dairies, cattle barns. We may be looking somewhere out west where there are more cattle feedlot, large cattle barn operations than what we see here in Ohio. So those are all sort of different ways that we find those sales that we're using in our appraisals. And I guess the other common question, and this is the one, I guess, as appraisers, we really don't like so much, but is how much is an acre of farmland worth right now or how much do you think my farm is worth today?
Matt Adams (28:19):I know account officers, we've never asked you that question for an upcoming auction, right?
Phil Young (28:23):Feel like ask that like once a week. I was there.
Jennifer Wilson-Oechsle (28:24):Yeah. And I'm sure you've heard me on the phone maybe get a little wily. I don't like answering those questions. And us as appraisers, as a profession are a little uncomfortable with answering those questions. We'll dance around the subject. We don't like to give you a straight answer.
Matt Adams (28:45):And they said, they're not like account officers, Phil.
Jennifer Wilson-Oechsle (28:48):I guess this question would be more similar to your, what are interest rates today? People always want us to tell them what land is worth, but there is a reason for that lack of a straight answer. It's because once we're licensed, once we get that certified appraiser license-
Phil Young (29:03):Get your badge, right?
Jennifer Wilson-Oechsle (29:04):Get our badge, yeah. We take that test and we become licensed if we provide a value even within conversation and even if considered off the record, we all have off the record conversations that can actually be interpreted as an appraisal, as a value and any perceived notion of an appraisal needs to be accompanied by various disclosures and support that we have to keep on file for like three to five years, depending on what it is and what's going on. And we keep those work files. And so just telling somebody, your farm is worth x needs a little bit more of background work done on our side because we technically can't do that. Somebody who's not licensed can give you an evaluation, but us as an appraiser, it's not as simple.
Phil Young (29:53):Yeah. So the phrase with great power comes great responsibility, right? Gotta wheel power carefully, right?
Jennifer Wilson-Oechsle (29:58):Great power.
Phil Young (29:59):Yeah.
Matt Adams (30:00):I just want to see her like flip, open, like a badge when she was…
Jennifer Wilson-Oechsle (30:06):Official.
Phil Young (30:06):Flip it open.
Matt Adams (30:07):Jen, I know one question I got here and it's just typically when we deal with a lot of our young beginning farmers, when we tell them, "Hey, my appraiser, Jen Oechsle is going to be calling you to talk about your farm. They really get nervous. How do they prepare themselves when you're going to contact them about the farm they're looking to purchase?
Jennifer Wilson-Oechsle (30:29):Sure. So if it's bare land, the biggest things we're going to want to know is what's that drainage look like. And we honestly know sometimes, especially if you've purchased something at auction, and if you maybe haven't been farming right next to it, you may not know-
Matt Adams (30:44):You may get the tile maps. You may not.
Jennifer Wilson-Oechsle (30:47):Right. There may not be tile maps in existence, but sometimes as the buyer, it's more comfortable for you to go to the seller or to the auctioneer, even to get some further information on that track, especially if you don't want that buyer. Because sometimes we do get permission from the buyer to talk to the seller. But if you as the buyer don't want the seller to know who you're borrowing from, you don't want us to make that phone call, which is perfectly fine and we understand that, but drainage is important to us to know, is that clay tile, is it plastic tile? Do you know how far apart they're spaced? Are there any wet holes, drainage problems on that farm? So that's good homework to maybe do beforehand.
Matt Adams (31:33):And probably the same, even with if there are improvements on the track as well, how new is the roof, if it does have a furnace or what year were those put in, if you know that and kind of the updates, because I feel the better you can promote a parcel, the better the appraisal.
Jennifer Wilson-Oechsle (31:52):Exactly. The more information we can get, especially when it's in conjunction with improvements, new roofs, concrete floors. If you're buying a track that has improvements, especially if you feel like the inside is nicer than what the outside might convey, it's important to try to get us access to those facilities, because you're going to get a better value if maybe the outside has old, not great exterior sighting, worn down, but the inside might be redone a nice heated shop, but the outside does not look like the inside might have a heated shop. Those are important things to get us into. We can't always tell that data from the tax cards. Some counties tax cards are more detailed with improvements, some don't even like to give us the square footage of buildings. So it is important, especially if you feel like the insides are better than the outsides, don't trust an appraisal just from an exterior inspection for those cases because we sometimes have to make that assumption that the interior is similar to what the exterior conveys and that's not always the case.
Phil Young (33:09):Well, good. Any other final thoughts Jen, before we wrap up here.
Jennifer Wilson-Oechsle (33:14):Gosh! I really appreciate this ability to talk to you guys, sometimes us as appraisers many of us work from home now, so we don't get to get out and do things like this and get a chance to talk to our borrowers, even if over a podcast abilities. But this has been a great experience. So thank you.
Phil Young (33:34):Well, good. Jen, thank you for joining us. And that's another great episode of AgCredit Said It. Thank you for joining us. And if you have further questions or want to know more about appraisals, want to know more about getting a loan or just have general questions on agriculture and the loans that we offer contact your local AgCredit office-
Matt Adams (33:49):Or call Matt and Phil. We'll talk to anybody.
Phil Young (33:51):Yeah, that's right. Thanks guys. We'll see you next time.
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